Accenture has added considerable strength to its already-strong position in Salesforce services with the addition of Cloud Sherpas for an undisclosed amount (press estimates have been $350-$400 Million) coming on the back of previous Salesforce services acquisitions of Tquila and ClientHouse GmbH. In addition, there are added capabilities in ServiceNow and Google, but the lion’s share of the Cloud Sherpas acquisition is in the Salesforce implementation domain, where we see the most medium-term growth opportunity for ambitious As-a-Service providers in the customer centricity solutions arena.

HfS views the success of this acquisition tied to Accenture's capability to integrate its capabilities across operations, consulting and systems integration and to use the core training and certification methodologies of Cloud Sherpas to transform Accenture’s own ability to grow Salesforce consulting, implementation and management talent.

However, if it only focuses on the low-hanging fruit – the systems integration – Accenture will fail to reap the full benefits of the investment, hence it is critical how it integrates the Cloud Sherpas talent across the core Accenture divisions, especially Accenture Operations and consulting. Accenture also needs to follow the mantra that As-a-Service is ultimately about empowering the customer, not the consultant.

In short, we believe this move not only consolidates Accenture’s already-strong position in Salesforce services, but also keeps out competitors from muscling into the space at a critical time, namely Deloitte, Capgemini and IBM.

As-a-Service can provide tremendous growth at scale potential like legacy ERP did, but the skill requirements are different

SaaS platforms like Salesforce and Workday might not be like traditional ERP platforms, but the commonality is still one of scale and skill. The difference is simply the type of skill requirement needed. With traditional ERP, enterprises need constant teams of engineers to mold the platforms to the business needs of the enterprise, whereas, with SaaS, they need teams of process and technical professionals to mold the enterprise to the SaaS standards and processes and make them effective. This is why we're seeing the global professional services giants eying teams of talented consultants and delivery staff who can do more than merely implement these popular platforms and respond to the customers' demands to have a post go-live partner.

The capability onus shifts firmly from the back office to middle/front offices to unleash future value

Ultimately, the enterprise will need less IT programmers to develop out a SaaS platform, but will increasingly need process experts and transformational minds to help them make maximum benefit from the SaaS functionality. The onus is shifting from back office engineering skills to middle/front office data science, design thinking capabilitles.

The real battleground in As-a-Service is emerging within business functions where there is no ceiling for innovation. With a process like payroll, for example, most enterprises can purchase the services they need to get the job done and provide the data they need to make decisions – they know what good looks like and can get there relatively quickly with the right As-a-Service provider.

Where this ceiling for innovation is limitless, is in processes such as sales and marketing, where the technology platform is the enabler for ambitious firms constantly pivoting to keep ahead of their customer demand and market shifts. Other functions with a high innovation potential include finance, workforce management and supply chain, where enterprises have a constant need to act decisively on data, not simply collect it and store it somewhere. This is where ambitious As-a-Service providers can gain an edge in the market, by investing in talent that help clients really achieve ongoing business value from SaaS, as opposed to simply deploying armies of programmers to keep the lights on. This is why KPMG bought out Towers Watson's Workday practice earlier this year - and Accenture has now added to its global SaaS delivery strengths with this significant investment of Cloud Sherpas.

As-a-Service has to be all about empowering the client, not the consultant

This is why leading As-a-Service providers are finding themselves in a rat-race to absorb talent that can not only deliver the bread-and-butter execution of process and technology implementation, but also help their clients post “go live” to work with them unto perpetuity to help them be effective and competitive in their industries. Simply put, the future growth in services is tied to many of the leading SaaS platforms that are being adopted aggressively by enterprises, such as Salesforce, Workday, ServiceNow, SAP Successfactors, NetSuite, and so on.

However, the critical factor the likes of Accenture, KPMG, Deloitte, IBM et al. need to understand is they have to do more than sell a COE of expensive consultants to slap in the platforms. Enterprises are investing in SaaS to free themselves up from the shackles of legacy technology and have operations that can keep pace with the needs of the front office: in other words, they need to be able to help their clients receive operations As-a-Service:

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Why Accenture/Cloud Sherpas is a strong fit in terms of talent empowerment and scale for managed Salesforce-based services

For Cloud Sherpas, we believed that having depth across the breadth of all the components of the Salesforce Customer Success Platform was a looming challenge as our recent discussions with clients have shown that they want that breadth but saw Cloud Sherpas as much more specialized in the Sales and Marketing Clouds than the other components. These clients were telling us that they were increasingly looking for support and coordination across the full Salesforce offering and that they expect their service providers to be able to bring them not just implementation, but also consulting and management skills to support their business needs.

They aren’t looking for single product implementation partners in 2015, as they may have in years past, but their needs are more comprehensive, so for Cloud Sherpas this meant that they would have to invest further in consulting depth, in addition to product implementation capabilities to meet this evolving demand as Salesforce revenue itself was up 24% in Q2 2016 YoY. The other challenge we had noted was that Cloud Sherpas was not as developed in providing ongoing managed services post implementation, both for application or business process delivery around Salesforce, than other leading service providers.

Simply put, Cloud Sherpas has grown its business to the ~$200 million level largely more through one-off implementations than in the provision of post go-live ongoing support. At HfS, we believe the firm was beginning to plateau at this level and needed access to global resources to grow the business to a broader level, both in terms of scale and geographic presence. Many Salesforce clients have indicated to us they want to shift more and more of the tasks around Salesforce management over to others to run and support the platform, and this would also have required a significant investment and shift in focus for Cloud Sherpas. In short, this is a good a time as any for Cloud Sherpas to make a strategic market move, and merging with Accenture is a very realistic and practical move for the firm.

Both of these challenges for Cloud Sherpas are also strengths for Accenture, with its breadth of Salesforce platform coverage and its extensive management services capabilities. However, the challenges for Accenture are different. Even with the largest pool of Salesforce-certified talent, Accenture was still resource constrained especially as clients (including many we spoke with) looking to broaden the depth of their Salesforce deployments and to transform their operations. Part of this challenge is simply being able to recruit and train staff with the right technical and business process skills to enable Salesforce to be not just operational, but a generally effective platform for clients seeking better access to customer data, more responsive marketing campaigns and enabling sales and marketing teams to approach business problems more creatively.

Accenture was especially short relative to its size in access to higher level certified architects and building a training environment for certifications that could keep pace with demand. Those as it turns out were both strengths of Cloud Sherpas who as a SaaS services start-up had built the specific Salesforce (as well as ServiceNow and Google environments) team development programs and processes that Accenture was lacking. Accenture had the scale and the global delivery network to support their clients but now needed the accelerants for growth to match client demand. HfS also believes that Accenture needed to also give greater internal visibility to Salesforce and other cloud platforms than had been the case because as big as these capabilities have grown they are still dwarfed internally by the team around SAP, Oracle and other solutions. Buying Cloud Sherpas therefore not only adds to the capabilities to grow the practice faster but also adds ~1,100 members to the team across Salesforce, Google and ServiceNow including roughly 600 in Salesforce services alone. Like when Accenture purchased Procurian for procurement services BPO back in 2013, HfS believes that the acquisition of Cloud Sherpas acts as an internal organization change agent within Accenture. The need to make the business case of the acquisition concentrates the organization on a shared goal and allows for the re-shaping of resource pools and organizational models that can’t be as easily undertaken just with organic growth. In the case of Salesforce Services, this organizational change is manifested in the decision to create the Cloud First Group to incorporate all of the focused SaaS design, implementation and delivery resources in one place and to further elevate its internal position to the client teams and the leadership of the Technology Growth Platform.

Therefore, when we look at two challenges that we had identified for each of Cloud Sherpas and Accenture around Salesforce services, we believe that barring any visibility into the actual financial structures of the deal, these challenges are well addressed by this coming together.

The Bottom-line: Competitor response is critical, otherwise Accenture will continue to lead the Salesforce As-a-Service market

We believe Accenture not only solidifies its position at the forefront of the market, but it also keeps out its competitors by tying up one the most attractive specialists in Salesforce delivery. Rather like its acquisition of Procurian in 2013 tied up the Procurement-as-a-Service market, Accenture is banking on Cloud Sherpas having a similar impact in Salesforce services: take a stranglehold position as the market is quickly maturing.

The big question, now, is whether Accenture’s core competitors in Salesforce services have the appetite - and depth of funds - to make a play for other specialist Salesforce providers such as Acumen, Appirio and Bluewolf. Deloitte is consistently avoiding being a managed services provider - preferring its role as consulting partner; KPMG is flirting with it, but seems more enamoured with building a service delivery world for large enterprises around Workday, while IBM sold off its CRM BPO services to Concentrix and needs to make a similar move to Accenture here, if it really wants to be more serious that an SI player in the space. HP could be a wildcard, with its strong CRM BPO business and Salesforce relationship, provided it can quickly get past its recent restructuring to make a strategic investment in this area. Capgemini is another contender here, with excellent technical implementation capability, but its BPO services are much more centered around finance and supply chain, that customer centricity.

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6 Comments

Phil - a very informative and insightful article. Do you believe Accenture can command strong post go-live revenues from Salesforce in the long term? My concern is there is initial implementation spend, some consulting and the client has less need for external support,

@Rob - it's a fair question and one where the answer is only just taking shape as clients get more experienced with their marketing needs. When you look at the Accenture investments around marketing operations (BPO) services, digital and sales effectiveness, having the full spectrum of capabilities right across the front office is critical. I see the need for collaborative, analytical support only increasing as global markets open up more and become even more complex - the onus switches to the service providers being able to acquire and nurture that talent to support clients. This is what I see going on right now - we're in a land grab not only for market share and client contracts, but also for the limited supply of talent which can generally grow with these increasingly complex client needs. So there is growth opportunity, the challenge is whether providers like Accenture can cater for the emerging demand - and this is much more than merely selling SaaS platforms, it's providing an integrated offering across managed operations, strategy, analytics, process re-imagination etc. It's about empowering clients to be more effective, not just selling bundles of consulting hours like the ERP gravy train of yesteryear... Interesting times and these answers are only just really beginning to unravel,

@Nigel - the way most the large providers are set up today, they simply cannot deliver As-a-Service effectively:

1) The are too vertically set up, in most cases, across industry lines (with each vertical P&L wielding a lot of power to dictate their own policies);
2) Most providers also have too many separate P&Ls, for example an infra service line, app service line and a BPO service line. Product service lines in most cases too. Each division often has its own contracting, pricing, risk tolerances etc that are unique to those service lines

With As-a-Service, client expectations are maturing around integrated services. Some form of infra, storage, comms, app functionality and some business process management, where as-a-service is optimized around that integration as opposed to discrete components (i.e. server, storage, cloud teams).

As a result, most large providers still don't know how to price, solution, assess the risk.

This is why many of today's providers cannot operate effectively in this market without changing they way they are structured and developing comming service calalogs, practices etc.

Accenture is making a big bet by scooping up the talent - its challenge now is to integrate it across its core service lines so it can deliver to clients' expectations around an integrated offering. It's still early days, but there is a real danger that one or two providers are going to run away with this market very, very quickly unless others can address the internal structural challenges and investments they simply have to make,

What a timely article, Phil.
If we, service providers don't acknowledge the nuances of As-a-service and act on it immediately - we'll be looking good in history pages.
Keen to see how this acquisition pans out for Accenture, others too would be evaluating the progress of picking such interesting, relevant niche providers that are changing the landscape.
Obviously, as you rightly say Accenture had to spotlight on Salesforce - as the other well known platforms in next 24 months may not exist!

[…] considerable scarce talent in a hot market. Not dissimilar to the recent Accenture acquisition of Cloud Sherpas, these SaaS services takeovers are all about the large providers hoarding scarce As-a-Service […]